Real Estate Investor Magazine South Africa September 2014 | Page 58

GLOBAL PROPERTY

BY TONY CLARKE

UK
Housing Market
The

Solid performance

T

he Zoopla Zep-Index, one of the more
respected UK property analysts, says that
average house prices in the UK at the end of
the second quarter of 2014 were 7,62% up year-onyear, giving an average house price of £172,029.
Long-term performance
Many people are aware that central London residential
prices, which had already risen 289% between 1990
and 2007, had continued to be among the world’s
best performers, rising a further 18.2% in the last year.
However, few realise that huge value improvements
had taken place in most of the UK residential market
since mid-2013 – although as yet they have not been
much in evidence in such lower populated areas as
Wales, Northern Ireland and the northern counties.
The renaissance of the UK housing market taking
place on the back of a greatly improving economy has
been nothing less than phenomenal and this proves
yet again the validity of the belief that if one takes
a ten-year view of property, you will always find it a
satisfactory investment.
Encouraged by exceptionally low interest rates, the
number of home sale transactions, despite a serious
shortage of stock, had in fact increased by 15.12% in
2013 alone, resulting in a figure of 107,300 transactions
in one year. From a low point in 2009 the average
home price had risen by some 50% to the already
quoted figure of £172,029.
Price bubble?
Not surprisingly, by March/April this year the UK
Chancellor – and others – were warning of a price
bubble and overinflated prices. However, this had not
happened: the market had already corrected itself and
is continuing to do so. The big increases of last year
now, it appears, are unlikely to be seen again: in July
the Zoopla Zep-Index recorded the lowest monthly
increase in 15 years, i.e. 0.1%. Nevertheless, it is still
predicting a house price growth above 6% in 2015.
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September 2014 SA Real Estate Investor

Driving forces
These satisfactory figures are in large part due to the
UK’s exceptionally low interest rates. Mortgages this
year have averaged between 2.37% for a two year period
and 3.47% for a five year period – hardly expensive by
any standards.
The figures quoted should also be seen in relation to
the UK’s low inflation rate, currently said to be around
2%, and to its increasingly satisfactory GDP growth,
which rose 2.9% this year and looks set to remain close
to those levels for the coming year.
A serious shortage of stock has also boosted buyer
demand and pushed up prices. At the moment there
is no sign of this ending because there has been a
slowdown in the number of new homes being developed
– at almost 40% in the UK. This is in large part due
to the difficulties that both developers and consumers
have in getting bonds. Another driver is the UK’s firsttime home buyer system, the UK government making
it possible for buyers buying below £600,000 to secure
a home loan with only a 5% depos ]